World Bank Sees Dollar Reserve Status Ending Over Next Decade

In a report released yesterday titled "Multipolarity: The New Global Economy", that other "bailout" organization, the World Bank, says that due to the developing world's pronounced greater growth curve through 2025 (expected to grow at 4.7% compared to 2.3% for the developed countries), the outcome will be that "The balance of global growth and investment will shift to developing or emerging economies." More importantly, as the FT summarized, a "different international monetary system will gradually evolve, wiping out the US dollar’s position as the world’s main reserve currency." As a result of these "inevitabilities" (which will be interested to see how they are attained considering according to a recent report, the world will need to double its debt to double it GDP, so where all this new debt will come from we don't really know), there are three potential scenarios: i) A status quo centered on the US dollar, ii) A system with the Special Drawing Rights (SDR) as the main international currency, iii) A multicurrency system. And while this obviously covers every possible outcome so absolutely no value added there, the WB is focused on outcome iii and believes that the dollar will gradually shift away from its current position of reserve currency prominence. This is not surprising: after all it is none other than World Bank president Robert Zoellick who recently predicted a return to the gold standard and an end to USD hegemony. Our advice to Bob: stay away from penthouse suites at the Sofitel.

Most interesting in the report, which is for the most part trivial, is its analysis of ever greater Chinese relevance in global capital flows (much more in the slide presentation below):

More from the FT's take on this report:

The World Bank expects the US dollar to lose its solitary dominance in
the global economy by 2025, as the euro and the renminbi establish
themselves on an equal footing in a new “multi-currency” monetary
system.

The implications are wide-ranging. For instance, Mr Dailami said this
power shift would lead to big boosts in investment flows to the
countries driving global growth, with a significant increase in
cross-border mergers and acquisitions activity, and a changing corporate
landscape in which “you’re not going to see the dominance of
established multinationals”.

In addition, a different international monetary system will gradually
evolve, wiping out the US dollar’s position as the world’s main reserve
currency.

“The current predominance of the US dollar would end sometime before
2025 and would be replaced by a monetary system in which the dollar, the
euro and the renminbi would each serve as full-fledge international
currencies,” the report said, highlighting what it considered the “most
likely” of three scenarios for the currency markets in 15 years.

The dollar's successors: EUR and CNY.

The report identified the euro as the most “credible” rival to the US dollar, with one caveat. “Its status is poised to expand, provided the euro can successfully overcome the sovereign debt crises currently faced by several of its member countries and can avoid the moral hazard problems associated with bail-outs of countries within the European Union,” the report said.

On China, the report noted that authorities there had already started “internationalising” the renminbi by developing an offshore market in the currency and encouraging the use of the renminbi in settling and invoicing international trade transactions.

“A larger role for the renminbi would help resolve the disparity between China’s great economic strength on the global stage and its heavy reliance on foreign currencies,” the report said.

The report's conclusions summarized:

The
postwar global economic structure –defined by the dominant position of
advanced countries –is in the midst of a fundamental change

If the HK futures exchange can pick up significant volume, that might be the case. Until it does, the COMEX and pals are likely to continue to attempt to drive down the open interest by suppressing prices.

That's what this whole exercise comes down to. They must either decrease the open interest, or abandon their policy goals and allow the metal price to rise so they can get the silver they need to satisfy delivery. I just don't see that happening. The desire for the illusion of a strong dollar is too great.

I purchased some physical silver around 1 PM Pacific yesterday from Northwest Territorial Mint. I paid $35.32/oz with no shipping cost. You must use the phone order and purchase at least 50 oz to get free shipping. I've purchased from them before. The only draw back is the wait. The wait now has increased from 8-10 weeks. The wait time used to be 6-8 weeks. I asked, "Why the long wait? Are a lot of people buying." The sales person answered with a yes. If this is not a sign of physical short fall then I don't know what is.

If you have get your metal faster (or want to use a credit card) you can go through their retail outlet. The premium is steeper, the customer pays for shipping and insurance, and there's the 3% tacked on to cover the Merchant Fee. The one time I bought this way (to max out my brand new JPMorgan/Chase 0% interest for 18 months credit card to buy physical silver) it took 7 - 10 days to get my shipment.

Have not used NWTM for gold or other PMs. Their premiums for gold seem to be higher than Tulving and APMEX.

:). Article forgets to mention that SDR is virtually no change from the status quo - USD dominates it along with JPY, GBP, and EUR. Re-evaluation to include other currencies has been put on hold indefinitely barring a meeting of the IMF directors at Riker's Island.

Did anyone else notice the text in the slides looks layered? Try to swipe the text in the first slide and you will see what I mean. Some text will highlight, but some text won't. It looks as though text was layered over an image where the text looks almost like, but not exactly, the image text.

For example, the heading "MultiXolaritX: A New Global EconomX" the X's represent background image text which isn't swipable (its an image) where as the rest is swipable (and copyable).

You can sort of see the font differnce in this context and spot other discrepancies throughout the document. It is easier to see in full screen mode as well.

Still nursing my coffee ... I am off to be paranoid at work shortly ...

Probably not. Bankers can make($), many (€), many(CNY) more billions in profit/theft from an economic system with multiple reserve currencies than they can with a single reserve currency ($). The SDR, however, takes away from the bankers' meat & potatoes as well as the gravy train.

Yep, and by having "physical" you could also include having some physical skill that adds value to people's lives or ANYTHING physical that is of REAL value. Sit back, watch the paper world burn. When the financial fucknuts come looking for food, serve them up for dinner. At least in my neck of the woods, the poor folks (of all colors) still see value in sharecropping.

Something tells me that the folks in the Delta will survive this future far better than the red-suspender crowd in Manhattan and D.C. Peanuts, okra, watermelons, peaches, I sometimes envy those living in the U.S. subtropics.

"World economist using old models to predict future markets" - Nice : The elitist attitude towards the Euro is dashingly insulting. These elitist institutions have the brass balls to talk about a monetary union that is currently breaking up on the peripheral and if that occurs the core will see smaller, stronger monetary union that would be value at a much higher exchange rate. This in itself would stunt growth as the core has been engineered towards exports. To prevent this from occurring they want to 'bail-in' further with further debt-enslavement at the people's expense. Insulting.

The real problem here is that the Federal Reserve and the SEC are part of the World Bank. So does this mean the Private Federal thieves Reserves is purposely devaluing the dollar to put out these stupid SDR's?

If the U.S. were able to unilaterally abrogate its debt to certain large Asian countries, without having oil exporters going apeshit (big if), it *might* be able to pull the rabbit out of the hat, but it would be one ugly rabbit, and it might involve the loss of Guam.

Yes its funny how Central banks are now buyers of Gold......even Mexico....Mexico???? WTF...but hey...its all good....if I was a country that had a bunch of dollars...I would be spending them as fast as I could for real stuff...land...buildings...metals...not more paper...

The World Bank is a very euro- centric organisation albeit traditionally with a American head.

Anyhow Robert Zoellick did not mention anything about a Gold standard as far as I recall - he mentioned using Gold as a reference point for the global financial system.

A fixed gold standard would imply our banker friends would have to apply some discipline to their credit creation - I can't see how they could agree to such a onerous duty of care for their fellow man.

That is correct, and how the world views it. I was stumbling around the IMF site and they had a blurp that now 1SDR = 1USD (even though on their site they have the same info as you posted), but cannot find it again or I would link it. I should have linked it in my original post, but was multi-tasking badly ;)

This sounds like someone I know! Including the ee Cummings punctuation. Part of a deflationary burndown is the senior currency getting stronger as credit and asset values collapse. Since there is no real money in the system, the banks base all their finances on fake asset valuation and extension of credit. This clearly outweighs the extra credit pumped into the system. A lot of this talk is fomented by the FED and the world banking system trying to fight off deflation. They love fireboming the dollar by the media. But all currencies are on the same footing- total malarky- so the dollar is no worse than the euro or the Chinese Yuan. If anyone here wants to pin their caboose to the Chinese currency while its in the process of hyperinflating- go for it! Their exports are falling, the labor pool is getting angry and thats what China is based on- slave labor. Go for it! The euro is a political currency- or more likely a banking hologram that they can control and make. They would love a global FX system. But the British said fuck off in the 80s. So why would the US go global. Its going to take decades for the dollar to lose that status. The cheaper the dollar goes, the further the carrytrade and the bigger the unwind. And the dollar has been basing higher no matter how much the FED prints. DXY was 70 in 2007. Its 75-76 now despite printing. It just confounds people!

The status of the U.S. dollar as the world's reserve currency is arguably based on the status of the U.S. military as the world's reserve military force. Is the plan to shift from a "single polar" dominated world military landscape to a "multi-polar" multi-military power-sharing arrangement between the U.S./NATO and China? Or is the plan to let China keep printing until the collapse into hyperinflation and then to merge the U.S. currency with the Chinese currency and then strong-arm the yen and the Euro into compliance.

That plan would work with one small exception. Every piece of U.S. currency has four simple words printed on it. The cornerstone of Communism is not trust in God, but rather trust in the state. There are plenty of other differences between the U.S. and China, but that one would seem to be the most fundamental and is represented on the face of the currency itself.

The proposal that was circulated by Mervyn King of the Bank of England called for a new model based on a "divorced" currency - one half as a non-fractional currency with full gold backing to satisfy the double coincidence of wants while eliminating systemic risk and a second half as a fractional currency with a fractional gold backing and significant friction for liquidating (think IRA account/special purpose vehicle) thereby mitigating systemic risk significantly. (here's a link with some background quotes: http://tradewithdave.com/?p=5310)

The thing about the "In God We Trust" issue is that once you move into an electronic model/cashless society then currency becomes "faceless" and the opportunity for a society to express trust "on the face" of the currency itself is passe' and any "trust" remaining is trust in the system itself, or in the case of this proposal, trust in the World Bank. I guess trust in the IMF is at a low point, so it probably was a good time to float this proposal.

In the divorced currency model as proposed by King, it does a great job of covering odors and essentially works as "two... two... two mints in one." The convenience portion will allow for sovereigns to offer a currency with state branding, but its use will be very limited it in a cashless society and considering the intraday velocity and a continuous global rolling settlement via the CLS Bank, the books essentially never have to reconcile in a non-Dodd-Frank compliant foreign exchange model. (see this post for the global revolver that never runs out of bullets: http://tradewithdave.com/?p=6291)

So you essentially end up with three forms of money.

a) Novelty bills with your favorite state characters printed on them for collectors and buying hot dogs on the street or fake Chanel handbags in Chinatown.

While I agree that the world fiat is coming, history shows that people will demand accountability. Systems either become accountable and prosecute fraud or capital and talent finds a new market (be it a black market or otherwise. PMs serve as a safe store of wealth and value during any monetary transition because no harvard-trained financial fuckwad can create the metal out of thin air.

Strauss-Kahn’s IMF and Robert Zoelick’s World Bank have sordid histories of their members getting rich allegedly fighting poverty.As international-aid observer, Graham Hancock, put it in “Lords of Poverty”: “money has never been easier to obtain… with no messy accounts to keep, the venal, the cruel and the ugly are laughing literally all the way to the bank… All they have to do…is screw the poor.”

And, now, this professional fraternity of power elites with their hands on the levers of the American government intends a leap frog to the levers of world power, already proclaiming the demise of America as the world’s city on a hill while making the case for a world currency that they will issue and control.

Not only is the IMF housed in our nation’s capital without identification as a foreign embassy but it has its fingers (the same hand as the Federal Reserve’s)on our currency and, thereby, its controlling fingers on our laws and on our political “representatives.”

Lord Aikins Adusei, a political activist and anti-corruption campaigner, makes the case in IMF and World Bank: Agents of Poverty or Partners of Development? that it isthe aim of the IMF and itsmega financial institutions to keep the world’s poor in debt and in poverty. He writes :

“The World Bank may be a vital source of financial assistance to the corrupt regimes in these poor countries and not to the poor. There is no evidence to suggest that the poor people from third world countries have benefited from loans given to their governments. At best what the Bank and IMF have helped the poor countries to do is to build up massive debts that they may never be able to pay.

“Third World countries including the whole of Africa have incurred trillions of dollars in debts through loans contracted from the Bank, IMF and Western governments which the people who now wallow in utter poverty, never benefited. Most of these conditional loans were either stolen or used to service debts already owed by these poor countries. Part of the loans were also used to pay foreign expatriates supplied to the poor countries by IMF, World Bank as ´technical experts´ but whose contribution is the result of poverty seen in the third world. Again the loans were used to prop up corrupt regimes who diverted the funds to their private bank accounts in Switzerland, France, Britain, Liechtenstein and Luxembourg and Austria among others.

“In 2006 for example, developing countries owed $3.7-trillion in odious debt, servicing more than $570-billion per annum. An analysis by economist James Henry revealed that more than $1-trillion worth of loans ‘disappeared into corruption-ridden projects or was simply stolen outright.” ...The all Africa Churches Conference says this debt and its servicing represent ‘a new form of slavery, as vicious as the slave trade.’”

The taxpayers in these poor countries are still obligated to repay the development banks, all the while the World Bank in many cases increases its ”support to military regimes that tortured and murdered their subjects, sometimes immediately after the violent overthrow of more democratic governments.”

Tyler, I urge you to revisit what Zoellick actually said. He did not posit a true gold standard (ie. hard money). He posited a fiat basket centrally "managed" using gold as a (not necessarily exclusive) metric. There was no convertability in his proposal. In essence, just a globero managed by an unaccountable global cabal.

Tyler, I urge you to revisit what Zoellick actually said. He did not posit a true gold standard (ie. hard money). He posited a fiat basket centrally "managed" using gold as a (not necessarily exclusive) metric. There was no convertability in his proposal. In essence, just a globero managed by an unaccountable global cabal.

Tyler, I urge you to revisit what Zoellick actually said. He did not posit a true gold standard (ie. hard money). He posited a fiat basket centrally "managed" using gold as a (not necessarily exclusive) metric. There was no convertability in his proposal. In essence, just a globero managed by an unaccountable global cabal.

Switching to another monetary system, won't do jack shit. Monetarism begets fraud. Sorry I don't feel like switching from three card monty to 31.

Glass-Steagall and kick the Delphi-Roman-Venice-London monetary system to the curb, a few thousand years too late.

A world full of Sovereign Credit Systems (modelled after the Hamiltonian[American] Credit System) is in our future. If not, then there will be hell on earth.

Another monetary system (so easily gamed) cannot legitimately replace our current monetary system. It essence, it's the same fucking thing. So what if you puked in Bernanke's Monetary Gravitron, you'll love the same one painted red with a different name.

People are sick of the pig in a poke scam, and next time, they're going to open the bag before handing over their consent.